Bitcoin Falls 5% Despite Continued Accumulation by Investors

Investors continuing to buy bitcoin didn't stop the top cryptocurrency by market value from slipping by over $2,600 on Wednesday.

Bitcoin fell from $36,000 to $34,000 this morning (UTC time) and was last seen changing hands near $34,300, representing a 5% drop on the day, according to CoinDesk 20 data.

The price drop comes a day after U.S. Treasury Secretary nominee Janet Yellen suggested lawmakers "curtail" the use of cryptocurrencies amid terrorism concerns. "I think many [cryptocurrencies] are used, at least in transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels,” Yellen said Tuesday.

While the cryptocurrency is down, it's still within a week-long narrowing price range, as seen on the chart below.

A move below the lower end of the triangle would expose support at $30,000. Strength in the Dollar Index (DXY), which tracks the greenback's value against other major currencies, and regulatory concerns could trigger a bitcoin range breakdown. The DXY's performance has had a big influence on bitcoin's price since the March crash. At press time, the DXY is flat-lined near 90.50.

The odds, however, appear stacked against a notable price drop, as bitcoin investors remain undeterred by the bull market's pause and continue to boost their holdings. 

The number of addresses holding at least 1,000 BTC has risen from 2,407 to a new lifetime high of 2,438 in the past seven days, according to data source Glassnode. The rise does not necessarily imply the same growth in the number of investors, as a single person or entity can hold multiple addresses.

Meanwhile, the number of bitcoins locked up in accumulation addresses has gone up by 30,000 to 2,739,166 BTC in the past week. Accumulation addresses are those that have at least two incoming "non-dust" transfers and have never spent funds. Dust refers to insignificantly tiny amounts of the digital asset.

The metric does not include addresses belonging to miners and exchanges, and excludes addresses last active more than seven years ago to adjust for lost coins.

Lastly, Grayscale Bitcoin Trust (GBTC), the biggest publicly traded crypto investment trust, purchased a total of 16,244 BTC ($607 million) on Monday, sucking out significantly more supply from the market than miners had added.

Also read: Bitcoin Becomes Most-Crowded Trade After Passing ‘Long Tech’: Bank of America Survey

Grayscale's inflows aided the price rally from $15,000 to over $41,000 seen in the past three months and are pivotal for bull market continuation, according to JPMorgan. Grayscale is owned by Digital Currency Group, CoinDesk’s parent company.

It remains to be seen if persistent buying from large investors translates into a quick recovery. A breakout from the narrowing price range would imply a continuation of the bull run and open the doors for the psychological hurdle of $50,000.